Loan moratorium: FM Sitharaman asks banks to roll out resolution schemes by September 15

Finance Minister Nirmala Sitharaman said on Thursday that lenders must extend support to borrowers as and when the moratorium on loan repayments is lifted, asking them to roll out resolution schemes by September 15, 2020.

She said creditors should carry out a sustained media campaign to create awareness thereafter. FM Sitharaman also advised lenders to ensure that regularly updated FAQs on the resolution framework are updated on their (lenders) websites in English, Hindi, and regional languages, and are also circulated to their offices and branches.

The finance minister, in her review meeting with the heads of Scheduled Commercial Banks (SCBs) and NBFCs, added that COVID-19 related distress must not impact the lenders' assessment of their creditworthiness.

Also read: Govt working with RBI to extend moratorium, restructure loans, says FM Nirmala Sitharaman

During her virtual interaction with the heads of SCBs and NBFCs, FM Sitharaman focused on two main points - 1. Lenders immediately putting in place board-approved policy for resolution, identifying eligible borrowers and reaching out to them, 2. Quick implementation of a sustained resolution plan by lenders for revival of every viable business.

Meanwhile, the banks assured the finance minister that they are ready with their resolution policies, and have started the process of identifying and reaching out to eligible borrowers and that they will comply with the timelines stipulated by the Reserve Bank of India (RBI).

The Ministry of Finance has also been engaging with RBI to ensure that the lenders are assisted by RBI in the resolution process. FM Sitharaman also reviewed the progress made by various lenders under Emergency Credit Line Guarantee Scheme (ECLGS), Partial Credit Guarantee Scheme (PCGS) 2.0, and Sub-ordinate Debt Schemes announced as part of the 'Aatmnirbhar Bharat Abhiyaan'. She advised lenders to try and extend the maximum possible relief to borrowers before the festive season.

An amount of Rs. 1.58 lakh crore was sanctioned on August 31 under ECLGS, out of which more than Rs. 1.11 lakh crore has also been disbursed.

Also Read: Loan moratorium 'extendable' up to 2 years: Govt to SC

Meanwhile, under PCGS 2.0, Bonds/CPs of Rs 25,055.5 crore have been approved for purchase by Public Sector Banks (PSBs) so far, out of which Rs 13,318.5 crore amounting to more than 53% of the portfolio pertains to Bonds/CPs rated below AA-.

The Scheme has thus been a crucial intervention for lower rated Bonds/CPs.

The Finance Minister also appreciated the efforts of banks and NBFCs during the lockdown in effective implementation of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) and the Aatma Nirbhar Bharat-related measures.  

FM Sitharaman also exhorted lenders to proactively respond to the needs of companies and businesses, as well as those of individual borrowers, and to spearhead the efforts for rebuilding businesses desperate for help owing to COVID-19 related distress.

Also Read: 'Public going through hell' due to interest on interest: Borrower tells SC on loan moratorium issue